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Article
Publication date: 1 December 2004

Roger (Rongxin) Chen

This article examines weaknesses of multinational corporations in China. Many multinationals target high price and high‐end segments when entering the country. This…

Abstract

This article examines weaknesses of multinational corporations in China. Many multinationals target high price and high‐end segments when entering the country. This creates several problems. First, this market position makes them less sensitive to the growth opportunities in mid to low‐end segments. Second, the high price strategy provides local firms with opportunities to grow their businesses and to consolidate and increase market size in mid‐ to low‐end segments. Furthermore, the low cost strategy also helps local Chinese firms increase exports. After gaining competitive strengths, many local competitors upgrade their products and technologies to attack upper‐middle to high‐end segments, the core markets of many multinationals. This competitive dynamic suggests that multinationals should be aggressive and preemptive in monitoring local competitors in mid‐ to low‐end segments. When local firms are weak, using competitive prices is more urgent than bringing cutting edge products to the Chinese market. However, when local firms become strong competitors, though competitive prices remain important, multinationals should leverage their advanced products and technologies to compete in China. We discuss several factors contributing to the high costs of doing business in China and other factors contributing to success or failure of multinationals, such as establishing distribution channels, not ignoring the less affluent non‐central city markets, and educating the Chinese customers to create differentiated products and services.

Details

Journal of Business Strategy, vol. 25 no. 6
Type: Research Article
ISSN: 0275-6668

Keywords

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Article
Publication date: 14 April 2014

Xiaohua Yang and Clyde D. Stoltenberg

This paper aims to re-examine the role of institutions in the rise of made-in-China multinationals. Specifically, the paper seeks to understand how changes in the global…

Abstract

Purpose

This paper aims to re-examine the role of institutions in the rise of made-in-China multinationals. Specifically, the paper seeks to understand how changes in the global environment, especially global financial crisis, have solidified the Chinese government's role in pushing and encouraging Chinese firms to engage in outbound foreign direct investment (OFDI) activities.

Design/methodology/approach

This is a conceptual paper. The analysis is based on a large number of publicly available sources, including research papers, government documents, and reports. The paper strives to triangulate the validity of the data with multiple sources.

Findings

The study finds that while the role of the state in China has been evolving since the start of the economic reforms in 1978, by no means has it been lessened. Instead, the state has asserted its role specifically to grow Chinese multinationals in size and in number, by leveraging the financial resources accumulated over the last 30 years, by taking advantage of the cheap assets made available globally by the recent financial crisis and by institutionalizing its “Go Global” strategy.

Research limitations/implications

The study implies that the role of the state will be further solidified through China's national goal of enhancing competitiveness via knowledge acquisition through OFDI and simultaneously, multinationals’ OFDI initiatives and strategies will be reinforced by the state's economic policies and goals while their commercial interests will take on an increasing importance in the global marketplace and their behavior will co-evolve with and be reshaped by local, national, and international environments. The paper suggests that future studies employ co-evolutionary theory to investigate the role of state-owned enterprises (especially the functions of their CEOs) as well as non-state actors in shaping the institutional framework in China. Future studies should verify some of the ideas with empirical data and strive to triangulate different data sources to increase data quality.

Practical implications

The study also provides implications to Chinese policy makers on how to balance the government's role as conductor, enabler, protector, and constrainer while allowing Chinese multinationals to integrate into the global market for the benefit of both China and the world economy.

Originality/value

This study represents an original contribution to this topic. The research contributes to the study of globalization of Chinese enterprises by exploring the renewed dynamic relationship between the state and the firm after the 2008 global financial crisis.

Details

International Journal of Emerging Markets, vol. 9 no. 2
Type: Research Article
ISSN: 1746-8809

Keywords

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Book part
Publication date: 19 May 2017

Xin Guo and Frank T. Gallo

Abstract

Details

Multinational Companies in China
Type: Book
ISBN: 978-1-78714-547-4

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Article
Publication date: 1 January 2006

Usha C.V. Haley and George T. Haley

Despite close to two decades of foreign direct investment in China, and the country's enormous market potential, most US and European multinational corporations have never

Abstract

Purpose

Despite close to two decades of foreign direct investment in China, and the country's enormous market potential, most US and European multinational corporations have never made a profit in that country. The distribution of profits among multinationals also seems highly skewed. The latest survey on profitability showed that five US companies accounted for one‐third of equity profits among US‐based multinationals in China. This research proposes explanations for why multinationals fail in China and strategic solutions for profitable operations.

Design/methodology/approach

Through in‐depth interviews with 29 CEOs and directors of major, profitable US and European multinationals, overseas Chinese companies and People's Republic of China companies, this paper proposes a model of strategic convergence for successful operations in China. The first part discusses cultural and cognitive differences between Westerners and Chinese that affect the strategies they choose. The second part proposes a strategic model of convergence, fusing the best of both Western and Chinese business practices, for strategic success in China.

Findings

Profitable foreign multinationals in China appeared to modify their management practices on eight dimensions, often adopting traditional Chinese methods of strategic planning and evaluations of effectiveness, as well as relations with key stakeholders, especially the government. Yet, these multinationals continued to retain their Western norms and values in business dealings. Conversely, profitable Chinese companies that competed with these multinationals also modified their management practices in line with Western norms

Originality/value

The study has implications for the management of foreign subsidiaries in China as well as the successful management of Chinese foreign direct investment in the US and Europe.

Details

Journal of Business Strategy, vol. 27 no. 1
Type: Research Article
ISSN: 0275-6668

Keywords

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Book part
Publication date: 24 November 2016

Duane Windsor

The research question is how home country corruption and nationalism may affect operations of BRIC multinational enterprises. BRIC composition permits a comparison of two…

Abstract

Purpose

The research question is how home country corruption and nationalism may affect operations of BRIC multinational enterprises. BRIC composition permits a comparison of two authoritarian regimes and two constitutional democracies. Each BRIC features a different combination of corruption and nationalism. The chapter adds South Africa information for two limited reasons. First, from 2010 South Africa is a member of the BRIC summit process. South Africa is an important entry point to Africa, for BRIC multinationals and particularly for China. Second, concerning corruption and nationalism South Africa is analytically useful as a control context that helps illustrate but does not appear to change highly exploratory BRIC findings.

Methodology/approach

The chapter draws on limited literature and information concerning corruption and nationalism in BRICs to suggest tentative possibilities. Transparency International provides bribe payers index estimates for 28 large economies, with important multinational enterprises, and corruption perceptions index estimates including those 28 countries. These estimates include the four BRICs and South Africa. The available sources suggest some suggested findings about varying impacts of home country corruption and nationalism on operations of BRIC multinationals.

Findings

China and Russia are authoritarian regimes in transition from central planning-oriented communist regimes. They are global military powers, expanding influence in their respective regions. Brazil, India, and South Africa are constitutional democracies. India, a nuclear-armed military power, seeks a regional leadership role in South Asia. Brazil and South Africa are key countries economically in their regions. BRIC multinationals are positioned between home country and host country conditions. Chinese and Russian multinationals may reflect a stronger nationalistic tendency due to home country regimes and ownership structure.

Originality/value

The chapter is an original but highly exploratory inquiry into impacts of corruption and nationalism on BRIC multinationals. Extant BRIC literature tends to understudy effects of home country corruption and nationalism on managerial mindset and incentives in either commercial or state-owned enterprises.

Details

The Challenge of Bric Multinationals
Type: Book
ISBN: 978-1-78635-350-4

Keywords

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Article
Publication date: 1 August 2010

Wenli Yuan

This study aims to examine how American and Chinese employees of multinational organizations deal with conflict between them.

Abstract

Purpose

This study aims to examine how American and Chinese employees of multinational organizations deal with conflict between them.

Design/methodology/approach

In‐depth interviews were conducted with 42 employees from 28 multinational organizations operating in China. A constant comparative method was used to analyze the data.

Findings

The paper finds that both American and Chinese employees used various strategies to deal with conflict, such as integrating, insisting on one's own solution, compromising, yielding to authority, avoiding, passive resistance, dissolving the relationship, and a third‐party approach. In general, American participants were more likely to confront a conflict than Chinese participants. Findings of this study also indicate that differing motivations lead to the utilization of a common conflict management strategy.

Research limitations/implications

The validity of this study might be compromised due to self‐reported responses. Future researchers need to further clarify definitions of conflict management styles and pay more attention to adaptation during the process of intercultural conflict resolution.

Practical implications

The findings of this study will help practitioners become more cognizant of conflict behaviors in multinational organizations, and thus be able to prepare more effective strategies to manage conflict. Originality/value –This is one of few studies that examine conflict in multinational organizations from an intercultural perspective. This study is also one of few that utilize a qualitative approach to examine intercultural conflict management in a workplace.

Details

Cross Cultural Management: An International Journal, vol. 17 no. 3
Type: Research Article
ISSN: 1352-7606

Keywords

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Article
Publication date: 1 March 2006

Usha C.V. Haley and George T. Haley

Despite close to two decades of foreign direct investment (FDI) in China, and the country's enormous market potential, most US and European multinational corporations

Abstract

Purpose

Despite close to two decades of foreign direct investment (FDI) in China, and the country's enormous market potential, most US and European multinational corporations (multinationals) have never made a profit in that country. The distribution of profits among multinationals also seems highly skewed. The latest survey on profitability showed that five US companies accounted for one‐third of equity profits among US‐based multinationals in China. This research presented in two parts proposes explanations for why multinationals fail in China and strategic solutions for profitable operations.

Design/methodology/approach

Through in‐depth interviews with 29 CEOs and directors of major, profitable US and European multinationals, Overseas Chinese companies and PRC Chinese companies, this paper proposes a model of strategic convergence for successful operations in China. The first part discusses cultural and cognitive differences between Westerners and Chinese that affect the strategies they choose. The second part proposes a strategic model of convergence, fusing the best of both Western and Chinese business practices, for strategic success in China.

Findings

The research found that profitable foreign multinationals in China appeared to modify their management practices on eight dimensions, often adopting traditional Chinese methods of strategic planning and evaluations of effectiveness, as well as relations with key stakeholders, especially the government. Yet, these multinationals continued to retain their Western norms and values in business dealings. Conversely, profitable Chinese companies that competed with these multinationals also modified their management practices in line with Western norms

Originality/value

The study has implications for the management of foreign subsidiaries in China as well as the successful management of Chinese FDI in the USA and Europe.

Details

Journal of Business Strategy, vol. 27 no. 2
Type: Research Article
ISSN: 0275-6668

Keywords

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Article
Publication date: 6 July 2015

Peter Konijn and Rob van Tulder

This paper aims to understand the role resources-for-infrastructure (R4I) swaps play in internationalisation strategies, thereby contributing to a modern theory of the…

Abstract

Purpose

This paper aims to understand the role resources-for-infrastructure (R4I) swaps play in internationalisation strategies, thereby contributing to a modern theory of the multinational enterprises (MNEs) based on experiences of rising power firms. Since 2004, the Chinese Government; state-owned policy banks; and oil, mining and construction corporations have used a relatively unique form of internationalisation through complex, large-scale R4I swaps in Africa.

Design/methodology/approach

This paper uses a resource bundling perspective and political economy lens to analyse complex entry decisions and success, as well as the failure of R4I swaps. The paper is based on a comparative analysis of published case studies of R4I swaps in seven African countries complemented by field research by the first author.

Findings

The findings show that, under very specific circumstances, R4I swaps can be considered as a successful internationalisation strategy. R4I swaps enable Chinese MNEs to build and maintain relationships with non-market elites that control access to natural resources and infrastructure contracts.

Research limitations/implications

The sample of cases, although representing all relevant R4I-swaps, is too small to come for more quantitative conclusions on success/failure factors.

Practical implications

R4I swaps are a very unlikely model for Western MNEs, as they lack the necessary country-specific competitive advantages and institutional mechanisms.

Originality/value

To the authors’ knowledge, this is the first comprehensive study of all relevant Chinese R4I swaps in Africa and contains original data from fieldwork in Ghana and D.R. Congo.

Details

critical perspectives on international business, vol. 11 no. 3/4
Type: Research Article
ISSN: 1742-2043

Keywords

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Article
Publication date: 18 May 2020

Annette Metz and Christiane Prange

With the increasing dependence on the Chinese market, Chinese subsidiary managers rather than Western managers in the headquarters take responsibility for the overall…

Abstract

Purpose

With the increasing dependence on the Chinese market, Chinese subsidiary managers rather than Western managers in the headquarters take responsibility for the overall success of the multinational company (MNC). This paper aims to argue that Chinese managers need to actively interfere to guarantee the survival of the MNC. Transaction analysis is suggested as a tool to rebalance the relationship.

Design/methodology/approach

Based on illustrative material and experience cases, the authors highlight why and how Chinese subsidiary managers have to engage in interference management.

Findings

Introducing different strategies within transaction analysis shows how Western managers can deal with Chinese interference management to improve relationships.

Practical implications

With the use of transaction analysis, Western managers can verify their communication strategies and behavior to better relate to Chinese subsidiaries on an “adult” level.

Originality/value

Interference management is based on counterintuitive thought that Chinese subsidiary managers rather than headquarters become responsible for the overall success of the MNC. Transaction analysis is used to uncover hidden assumptions, communication strategies and behavior in headquarters–subsidiary relationships.

Details

Journal of Business Strategy, vol. 42 no. 3
Type: Research Article
ISSN: 0275-6668

Keywords

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Article
Publication date: 2 October 2009

Oded Shenkar

The purpose of this paper is to examine the features of Chinese multinational enterprises (MNEs), and identify the obstacles that Chinese firms must overcome if they are…

Abstract

Purpose

The purpose of this paper is to examine the features of Chinese multinational enterprises (MNEs), and identify the obstacles that Chinese firms must overcome if they are to become viable global competitors, as well as some of the strategies that can take them there.

Design/methodology/approach

Based on statistical data, the paper examines entry mode, regional and geographical distribution of Chinese outward foreign direct investment. It also discusses the obstacles, weaknesses and strengths of Chinese firms, and suggests where and how such firms can improve their capabilities.

Findings

If they are to become global competitors, Chinese firms need to develop an “MNE with Chinese characteristics” which builds on strengths such as a deep understanding of personal networks to solidify coordination and takes advantage of a tradition of appreciation of human relationships.

Originality/value

The paper presents a great deal of insight into Chinese MNEs.

Details

Journal of Chinese Economic and Foreign Trade Studies, vol. 2 no. 3
Type: Research Article
ISSN: 1754-4408

Keywords

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